The Frontier Economics report floats the idea of substantial regulatory intervention to stop the electricity market becoming even more concentrated.Photograph: David Gray/Reuters

Modelling commissioned by the Turnbull government as part of its efforts to back in the national energy guarantee says renewables will drive the first wave of price reductions under the policy. It also floats substantial regulatory intervention to stop the electricity market becoming even more concentrated.

The work by Frontier Economics, obtained by Guardian Australia, says a steep decline in wholesale electricity prices forecast between 2018 and 2022 is due to the entry of 6,000MW of renewable capacity which has already been incentivised by the existing renewable energy target.

The assessment notes that in order to meet their obligations under the Neg, electricity retailers can either contract for supply externally, or integrate vertically with generators, which could be more “cost-effective than external contracting”.

It notes this is a factor particularly in South Australia “where a high degree of concentration and vertical integration already exists”.

The work floats three heavy-handed options for market intervention by state participants in the national energy market:

New restrictions on which parties in the national electricity market can own, control or operate new generation.

Restrictions on which parties can be electricity retailers.

Restrictions on which parties can be both a retailer, and own, control or operate generation.

It suggests restrictions on generation ownership could be achieved by specifying limits about who can own generation capacity after a particular date, or imposing market-share limitations.

On the price impacts of the new policy, Frontier predicts there will be a “steep decline in wholesale prices” from 2018 to 2022 “due to the committed entry of almost 6,000MW of renewable capacity across the national electricity market” – capacity which is not linked to the new policy.

It says the new reliability requirement will “initially” lead to more competitive bidding from coal and gas, which will reduce prices if the guarantee is implemented, compared with the business-as-usual scenario.

It says the market will become oversupplied between 2021 and 2022, before the ageing New South Wales coal plant, Liddell, leaves the system, reducing supply once again.

Frontier says if the guarantee is in place, bidding from existing dispatchable plant will be more competitive than in the business-as-usual scenario.

It forecasts household power bills between 2020 and 2030 would be in the order of $120-a-year lower, in today’s dollars, than under a business-as-usual scenario, if the policy applied across the national electricity market.

Wholesale electricity prices would be 23% lower than business-as-usual between 2020 and 2030, on average.

While the expectation in Canberra is the states on Friday won’t stand in the way of further work being undertaken on the guarantee, which will keep the policy development process moving, South Australia is continuing to signal publicly that it does not support the policy.

The South Australian energy minister, Tom Koutsantonis, said the Frontier modelling showed the Turnbull government policy would “guarantee a longer lifeline for coal, more market power and more profits for existing generators”.

“Essentially the national energy guarantee is a guarantee for higher prices in South Australia,” he said. “There is nothing here for South Australia.”